A Tale Of Two Retailers

The final big-screen TV sales and profit numbers aren’t in yet, but indications are that retailers had a pretty good Super Bowl season.

But no matter how strong, a soft TV market is expected to continue this year with OLED and Ultra High-Definition TVs making a bigger impact by 2014, unless a surprise happens.

When you talk about financials, recent holiday season reports from two key retailers in the CE industry that come from opposite sides of the spectrum – hhgregg, a regional chain with national aspirations, and Amazon.com, the online behemoth that seemingly wants to have warehouses all over the country for same-day delivery — did offer a surprise or two.

Both reported softer CE sales, especially in the TV area, and both – within their highly different business models – outlined changes to generate more growth.

hhgregg is going to expand its furniture assortment, further develop the fitness category, and increase its major appliance market share to replace TV unit sales. The chain is still profitable, but net earnings declined in the double digits and same-store sales were off – again due to lower video sales.

What was interesting was what hhgregg said may have slowed sales volume in TVs: unilateral pricing policies (UPP). The programs have helped stabilize pricing and gross margins, but they limit the retailer’s ability to do promotions. We’ll hear how BrandSource and Nationwide Marketing Group members are dealing with that offshoot of UPP when each organization has its winter meetings in a couple of weeks.

hhgregg said it will slow down its planned national rollout until it gets its updated strategy up and running.

Amazon.com reported a double-digit decline in income during the fourth quarter and a loss for the year, but its stock price went up on the news. Huh?

Well, Amazon kept reinvesting in its retail business and building distribution centers and expanding its digital content portfolio. Investors expect the increased investments will create more, dramatic growth.

The diversified retailer/tech company – the split description comes from Wall Street blogs I have been reading – does have something in common with hhgregg in the quarter: weaker TV sales.

But Amazon’s overall sales in the “CE and other general merchandise” category rose 24 percent in North America, while media sales, including books and digital content, climbed 13 percent. And its e-books business is booming, becoming a multibillion dollar category.

Still, some analysts are wondering if it is more of a retailer than a tech company. If Amazon.com evolves into more of a dealer than tech company, the concern is about the cost of sales rising in the double digits, into the billions.

Some analysts have dared suggest that Amazon is following the strategy of losing money on every sale – and making it up in volume. Anyone who has been in the CE industry for more than a few years knows that is a formula for failure, no matter how big you are.

Or as the legendary former buying group executive Saul Gold once said, “You don’t get nutrition from a bowl full of volume.”